What does a G-3 target zone mean for emerging-market economies?

Carmen Reinhart and Vincent Reinhart

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the argument for a G-3 exchange rate target zone strictly from an emerging market perspective. A commitment to damping G-3 exchange rate fluctuations, however, requires a willingness on the part of G-3 authorities to use domestic monetary policy to that end. Under a system of target zones, then, relative prices for emerging market economies may become more stable, but debt-servicing costs may become less predictable. We use a simple trade model to show that the resulting consequences for welfare are ambiguous.

Keywords: exchange; rates; interest; rates; volatility; trade; debt; servicing (search for similar items in EconPapers)
JEL-codes: F40 F41 F42 (search for similar items in EconPapers)
Date: 2000-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/14099/1/MPRA_paper_14099.pdf original version (application/pdf)

Related works:
Working Paper: Twin Fallacies About Exchange Rate Policy in Emerging Markets (2003)
Working Paper: Twin fallacies about exchange rate policy: A note (2003)
Working Paper: Twin fallacies about exchange rate policy in emerging markets (2003)
Chapter: What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility? (2002)
Working Paper: Una banda cambiaria en el G–3 ¿Es lo mejor para los mercados emergentes? (2002)
Working Paper: Is a G-3 Target Zone on Target for Emerging Markets? (2002)
Working Paper: What Hurts Most? G-3 Exchange Rate or Interest Rate Volatility (2001)
Working Paper: What hurts most?: G-3 exchange rate or interest rate volatility (2001)
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